Record retention redux
What you need to know
Charles Selcer, CPA, MBA | June/July 2021 Footnote
Editor's note: Updated May 27, 2021
The issue of records retention has vexed CPAs for many years. An exposure draft was issued for this subject on May 1, 2020, that clarifies record request language.
The AICPA covers records request issues at 1.400.200 of the Code of Professional Conduct section for members in public practice. That code section further defines four types of records:
- Client provided records
- Member prepared records
- Member’s work products
- Working papers
The trail to an ethical answer for record requests begins with determining which of the aforementioned categories the request pertains to.
Recently, the AICPA prepared a Q&A to further shed light on these situations:
Q: A CPA was engaged to prepare a tax return. The CPA provided tax returns at the end of their work. The client switched CPAs and has requested a copy of the data file the CPA used to marshal the information as part of the preparation process. Must the CPA turn over the data file?
A: No. Unless an engagement letter states that the CPA was also providing related bookkeeping services, the data file need not be provided.
Q: A tax return client brought their information to the CPA who scanned the documents into a portal that the client has access to. Has the CPA met their obligation to return client provided records?
A: Yes, if the client has access to the portal.
Nuance matters
These situations bring up key concepts.
If an engagement does not provide bookkeeping as part of the assignment, the bookkeeping workpapers relating to such services do not have to be provided. If a client has access to what they have requested, they are deemed to have been provided such records.
The Professional Ethics Executive Committee (PEEC) is also looking at another sticky wicket concerning providing tax returns and records to couples who have or are seeking divorce. Stay tuned for clarification.
And there is more! Always be aware that Minnesota statute Sec. 326A.13 may be more restrictive. If a record is deemed to be part of client records but not otherwise available, they have to be given. Check out Minnesota law, which can be easily accessed via the state website.
Charles Selcer, CPA, CGMA, MBA, a founding shareholder of Schechter Dokken Kanter CPAs, has more than 30 years of audit and business consulting experience. He specializes in audits of not-for-profit and charity organizations and has extensive experience in statistical sampling and organizational planning. Selcer currently teaches professional ethics classes for the MNCPA and North Dakota CPA Society as well as at colleges and universities nationwide.
